In Life Sciences Partnerships, You Must be Smart from the Beginning: Takeaways From Xconomy’s On-the-Record Dinner

deal worth hundreds of millions of dollars can be extraordinarily complex, and requires months to pull off. So what are some of the key factors?

Xconomy asked some of San Diego’s life sciences leaders to explore this question and offer their advice in an “on the record” dinner discussion late last year.

In attendance at the dinner—which was hosted by Alexandria Real Estate Equities (ARE) and sponsored by the Latham & Watkins law firm, Ernst & Young accounting firm, and Hughes Marino commercial real estate—were Bob Baltera, former CEO at Amira Pharmaceuticals; David Kabakoff of Sofinnova Ventures; Kevin Gorman, Neurocrine Biosciences CEO; Wendy Johnson, Aires Pharmaceuticals CEO (and ProQuest Investments Venture Partner); Robin Jackman, Zacharon Pharmaceuticals CEO; Adam Simpson, chief business officer at Meritage Pharma, Peter Ulrich, former CEO of TargeGen; Ping Wang of the Ansir Innovation Center; Hui Cai, WuXi PharmaTech vice president of business development; John Wehrli and Steven Chinowsky of Latham & Watkins; David Marino and John Jarvis of Hughes Marino; Jodi Smith and Chad Whitehead of Ernst & Young; and Jonathan Kabakoff and Jason Moorhead of ARE. Xconomy associate publisher Jim Edwards also attended, and as Xconomy San Diego editor, I was more or less the moderator, master of ceremonies, and chief inquisitor.

Our conversation circled several areas of concern. Here are some key points that emerged:

—The lack of capital, or perhaps insufficient access to capital, on the part of life sciences startups is the No. 1 driver of behavior among decision-makers on both sides of biotech-pharma partnerships. Pricing is down for both biotech assets and entire companies—unless the target is a highly promising experimental drug in late-stage development. Aires CEO Johnson, who also views the industry as a venture investor through her role at ProQuest, says most of the deals she sees are offering biotech companies “a lot less cash up-front, and they’re very back-end loaded,” i.e. future payments depend on hitting a series of milestones in terms of advancing drug development. Unless a biotech is in the enviable position of entertaining multiple offers, Johnson says venture-backed companies have little leverage and few, if any, viable alternatives.

—Having worked with Sanofi after the acquisition of San Diego’s Targeson, Ulrich said the French pharmaceutical appears to be moving to … Next Page »